The Insurance Act 2015 - PowerPoint Presentation

Slide1

The Insurance Act 2015Insurance Institute of Manchester 8 June 2016

Nichola

Evans

Michael Howard FCII FICASlide2

Learning objectivesBy the end of this session, delegates will be able to

identify:

changes

to the statutory framework

potential problem areas, with particular reference to policy drafting

the remedies available to insurers in the event of non-disclosure

how to operate within the new statutory framework

practical considerations at policy renewal, with particular reference to insurance brokers

the possibilities of further insurance reformsSlide3

IntroductionThere’s not long to go…Focusing today on four main issues: 1. Fair presentation

2. Wordings

3. Warranties

4. ClaimsSlide4

Fair PresentationDisclosure must be “in a manner which would be reasonably clear and accessible to a prudent underwriter” (section 3(3)(b))

“

A lack of structuring, indexing and signposting may mean that a presentation is not fair”

(Law Commission)

No “

data dumping”Slide5

Fair presentation: Insurer’s knowledgeDeemed to know something if known to someone participating in decision to take on riskInsurers to be given sufficient information to put a prudent insurer on notice to make further enquiries

Insureds

do not need to disclose what the insurer knows, ought to know or is presumed to know

So what is it safe to assume that the insurer knows?Slide6

Fair Presentation: Insured’s knowledgeDuty to disclose every material circumstance which the insured knows/ought to have knownWho does this include? Not just potentially the BoardWhat searches need to be undertaken?

Who does the insurance cover?

Brokers…Slide7

Fair Presentation: Practical TipsUpdated proposal forms/policy wordingsKnowledge – knowing your client – and one size does not fit allHow should information be presented?

Different policies may need differing amounts of attention – search requirementsSlide8

Fair Presentation: Proportionate RemediesDeliberate/reckless breach = avoidance + no return of premiumOther types of breach: - would not have entered the contract = avoidance + return of premium

- entered contract on different terms = contract treated as if on those terms

- entered contract but higher premium – amount paid on claim reduced proportionatelySlide9

Fair Presentation: Risks and Potential PitfallsPotential challenges: - what constitutes a reasonable search/who should advise on this?

- the trap of

insureds

suggesting that insurers should have asked more questions

- deliberate or reckless breach – insurer bears burden of proof – where is the evidence?

- claims against brokersSlide10

Wordings: The BasicsBasis of contract clauses prohibited – cannot contract outTransparency required where insurer wishes to contract out: bring to the insured’s attention and the term must be clear and unambiguousSlide11

Wordings: The Potential PitfallsWhat if…The wording is not set out specifically?

There are merely numerical references to model clauses?

The broker is made aware of insurer’s full terms?

Insurers seek to avoid the over-arching basis of contract clause but impose warranties/CPs?Slide12

WarrantiesHow do you know if you have one?No

particular form of words.

Created by express statement or construction of a

term.

Include basis of contract clauses.Slide13

WarrantiesA policy term that needs strict compliance whether or not material to the risk.

It is a term where an Insured:

Undertakes to do/not do a particular thing;

Undertakes that some condition shall be fulfilled; or

Affirms or negatives the existence of a state of facts.Slide14

WarrantiesCurrently – breach of warranty means insurer can avoid all claims from date of breach.Possible even if the breach irrelevant or immaterial to the loss.

Breach cannot be remedied.Slide15

WarrantiesUnder Act warranties = suspensive conditions.

Liability suspended until breach remedied.

But some

breaches cannot be remedied

.Slide16

Warranties designed to reduce riskApplies if compliance would reduce risk of a particular kind, at a particular location or time.Where breached, only remedy if loss suffered is one of the kind, place or time contemplated.

Insured

to show breach

could

not have increased risk. How will Insured evidence?

Will insurers and

courts

seek to apply remedies strictly?Slide17

Unfair Presentation - RemediesDesigned to place insured at risk of losing premium if fraudulent presentation.

Where simply negligent – proportionate remedies will apply under Schedule 1(6);

If different premium, claim reduced proportionately

If different terms, claim considered against those terms

If insurer can demonstrate it would not have underwritten, then policy avoided and premium returned.Slide18

Remedies – impact on claimsProportionate remedies – likely to see less avoidance – possible retrospective underwriting?

The absolute right of avoidance has been watered down (although not extinguished).

Unclear whether subsequent claims also affected.

Subscription market problems.Slide19

ClaimsWhat if there is an average condition?Remedies will only apply if there is a “qualifying breach”.

Would this apply after the application of a policy condition i.e. average?Slide20

Fraudulent ClaimsNo definition of fraud in the Act.Mismatch between common law and MIA as common law allows forfeiture from act.

MIA allows cancellation ab

inito

/inception.

No claim arising out of fraudulent act.

Claims arising pre-fraud event now payable.Slide21

Damages for Late PaymentEnterprise Act 2016 amends Insurance ActEffective 4 May 2017Implied term that valid claims will be paid within a reasonable period

Allows time for investigation and assessment

Breach allows damages for late payment

Claim within 1 year of payment from Insurer.Slide22

Learning objectivesBy the end of this session, delegates will be able to

identify:

changes

to the statutory framework

potential problem areas, with particular reference to policy drafting

the remedies available to insurers in the event of non-disclosure

how to operate within the new statutory framework

practical considerations at policy renewal, with particular reference to insurance brokers

the possibilities of further insurance reformsSlide23

Presentation Available on

Nichola

Evans

Michael Howard